Microsoft Planning iPhone Rival

Microsoft (MSFT) can finally stop denying its plans to get into the mobile phone business. The company is working with Verizon Wireless to launch an iPhone rival early next year, the WSJ reports.

There’s a good chance this will flop, given how late Microsoft is to the game, and how crappy its other mobile gadgets and software have been — primarily the Zune and Windows Mobile. (The WSJ says a third party will probably make the actual device, but Microsoft is “involved” in its design.)

With Apple constantly improving the iPhone — which is currently years ahead of Windows Mobile — and even Palm back from the dead, Microsoft will really have to wow people to stand a chance here. And when’s the last time Microsoft did that?

For a long time, we thought there was something Microsoft could gain in the mobile market from its overwhelming dominance of the PC market. But that ship has likely sailed. Who syncs much data between their computer and phone anymore? Most sycing we do is with online services, and Microsoft is pitiful online.

The main reason Microsoft would want to enter the mobile phone industry is that its current market strategy — offering Windows Mobile licenses — does not make the company much money. As we outlined last year:

The problem: Windows Mobile isn’t Windows, lacking both its market share and price tag. Those 20 million licenses don’t make much for Microsoft, which only charges $8 to $15 per phone, according to research firm Strategy Analytics. Even at the high end of that range, selling 20 million licenses in a year is just $300 million in revenue for Microsoft. That’s couch lint for a company whose sales are expected to near $70 billion next year.

Selling hardware and software, therefore, may be more lucrative — even if it pushes some Windows Mobile partners away. But the important thing will be designing a mobile gadget that people want to buy, which Microsoft has not been able to do in the past.

NOW WATCH: Tech Insider videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.